Capital Gains Tax in Spain

- Updated: 16/11/2011

Published: 28/10/2010

Author: Tumbit -

Spanish Capital Gains Tax or Impuesto sobre Incremento de Patrimonio de la Venta de un Bien Inmeuble is complicated, but in simple terms, it is a tax charged on capital gains, i.e. the profit made on the sale of an asset that was purchased at a lower price. It is paid by residents of Spain on their worldwide assets and by non-residents on property that they own in Spain. The main home of Spanish residents can be exempt in certain circumstances. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property.

The rate for residents and non-residents is currently 19% (as of March 2010). For residents, you pay 19 % on the first €6,000 of total savings income (which includes capital gains) and 21 % on the rest. Non-residents pay a flat rate of 19 %.

Since March 2010 whether resident or non-resident you will be obliged to pay CGT on any property sale. However, the rate for non-residents used to be a whopping 35%, as opposed to 15% for Spanish nationals. This higher rate contravened the European Community Treaty rules on discrimination and the court said the higher levy must be repaid, with 6 per cent interest.

So if you were not tax resident in Spain and sold a property between January 1997 and December 2006 (when the rate was changed by the tax office) you are entitled to reclaim the 20% you were charged, but you only have until 1st November 2010 to take advantage of this window and make a claim. You will need a copy of your CGT form called Modelo 212 or 210 to proceed.

Generally, during a property sale, your bank will deduct 19% -21% of the interest paid and pay the tax office (Hacienda) on your behalf. Or you can ask your lawyer to obtain the relevant forms Capital Gains Tax Form 212 from the Spanish tax office.

There are no changes regarding the retention of 3% of the property price for non residents, but it is likely that we will see an increase on inspections to prevent tax evasion. Non residents have a period of three months after the sale to comply with their legal obligations for paying the remainder, regardless of the initial retention of 3% at the notary signing of the title deeds.

If the seller of the property is non-resident, the buyer will pay 97% of the property price at the signing of the deeds. The buyer then has one month to pay the remaining 3% to the Spanish treasury using form 211. This 3% retention is an advance on the capital gains tax that the seller will have to pay later on.
If the seller is a fiscal resident and is selling his main residence (where he has lived more than 3 years) he is not liable for capital gains tax if he reinvests the income by purchasing another main residence within two years. If only a portion of the income from a property sale is reinvested, then they will get a relief in the form of a percentage up to the total amount reinvested.

Also in Spain a person is exempt from capital gains tax on the sale of their main residence if:

*They are 65 years or over

*And they have lived in the property for three years or more (or, if less, had to sell because of a change of job, marriage, separation or the death of a partner).

In addition to capital gains tax paid on the sale of property there is also a local tax in urban areas levied by Spanish town halls known as the Plusvalia (which literally translates as ‘the gain’) which is paid on the growth in the value of the urban land (excluding any buildings). This tax rate varies depending upon the size of the local population and the length of ownership. For a town of more than 100,000 inhabitants the minimum tax rate is 20 percent and the maximum 30 percent, with the town hall fixing a rate within this.

Any Plusvalia tax paid is allowed as a cost of disposal in calculating the mainstream capital gains tax.

A seller will be able to offset tax exposure by considering:

*When the property was purchased – for instance if you have owned the property since 1994 or before.

*The costs of the purchase, (including Plusvalia tax) and money paid for major works done on the property.
*Extensions and improvements done on the property.

If you can provide receipts of extension or renovation work completed you may gain some tax relief, only if the costs are not general yearly maintenance.

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I am a UK national currently resident of USA and own a property on Spain. When I sell the house, would it be better to return to Spain or UK (become resident again there) for Spanish tax purposes or does it not make a difference?

Nick Sidley - Tue 28th Apr 2015

Eve : Sad but true ! - The "Complementary Tax" Law was intended to protect against the unscrupulous practice of "Under-Declaring" the sale value of a property in exchange for black money, but like so many other Spanish laws, it has proved to be well-intended but poorly thought out. In times when the market has dictated that property prices have little rhyme or reason, many have been caught out by this often unexpected tax. You can read more about this issue by clicking the link > HERE <

Tumbit - Admin - Tue 20th May 2014

We had paid all our taxes but when we sold our house at a loss, we not only had to relinquish the 3% retained but also a further 8000e as the tax authorities claimed that was the amount they would have been owed had we sold the property for the 'real' price. This despite the fact they the property had been for sale for two years and we sold it to the one buyer who made an offer. The Spanish tax authorities appear to be a law unto themselves and I now understand where the phrase 'Spanish practices' derives from.

Eve Wilson - Mon 19th May 2014

Denis : There are 2 schools of thought on this one - what you think you may or may not be entitled to claim / have to pay financially, and then deciding your chosen course of action, OR following the letter of the law. Under your circumstances - and given that Spain IS able to pursue debts when former property owners reside on other EU countries - it might give you peace of mind to settle your affairs in Spain in accordance with the law.

Tumbit - Admin - Mon 19th May 2014

WE were non-resident owners of a property in Spain which we sold at a substancial loss last November. The 3% retained amounted to 2,700 Euro. We were told that because we had not paid the non-resident tax for the previous 4 years, that there would be little point claiming any monies left after these deductions. Could you comment.

Mr Denis Davies - Sun 11th May 2014

I note the article is dated 2011, do you still get full relief if you are over 65 and a resident tax payer in the house for 12 years

G Henly - Fri 18th Apr 2014

Can you tell me what is the position of a resident of Spain selling a property in another country. Is the Spanish resident subject to CGT on the profit made from the sale? What is the position if the property was acquired before 1994? If the Spanish resident chooses to gift the property to a non-Spanish resident, rather than selling it, is the gift subject to (a) CGT on the gain, and (b) gift tax?

Nicholas Bray - Fri 21st Feb 2014

I would like to procure few details on selling shares in Spain. I bought myself few BBVA shares, however they are still undervalued and even while accumulating the dividends and cash I would still fall short on the amount that I have invested. Now I would like to sell them, how much tax do I have to pay while selling them.

Cristina Kallis - Sat 24th Aug 2013

hello
i am a british subject and a resident of Spain, in 1998 i purchased the freehold of a restaurant in Spain. i am now looking to sell the freehold and there will be a capital gain.
i am 68 years old what CGT do i pay, if any am i able to offset any of the tax.
many thanks
michael

Michael Wilson - Tue 21st May 2013

We are being charged CGT at a notional price rather than the amount we actually sold for. How can this be fair?

Eve Wilson - Fri 5th Apr 2013

In Sep 2006 my husband and I sold our house in Spain and left the country without paying the CGT. We are now considering returning to Spain and buying another property but we are concerned that we may still be liable for the CGT bill from 2006 and also possibly have a fine to pay in addition, or is this too long ago to be traceable ?